It is estimated that there are 18 deaths for every 10 million people who use airplanes....

It is estimated that there are 18 deaths for every 10 million people who use airplanes. A company that sells flight insurance provides $100,000 in case of death in a plane crash. A policy can be purchased for $1. Calculate the expected value and thereby determine how much the insurance company can make over the long run for each policy that it sells.

The expected value is $_______________________

Solutions

Expert Solution

P(Death) = 18/10000000 = 0.0000018

Hence,

Expected value = - 0.0000018*($100000 - $1) + (1 - 0.0000018)*($1) = $ 0.82

So the company is expected to make $ 0.82 per policy in the long run.

orchestra answered 1 year ago

Next > < Previous

Related Solutions

The population of the earth in the 1500s was estimated to be 100 million people. In...

The population of the earth in the 1500s was estimated to be 100 million people. In 1990 the world population was estimated at 2,600 million. Assuming that the growth rate is proportional to the population at each moment, estimate the year in which the population is 3,000 million.

A marketing firm claims the proportion of people who use social networks every day is different...

A marketing firm claims the proportion of people who use social networks every day is different for people with no college than for people who are college graduates. To test the claim they conduct surveys of both groups asking “Do you use a social network like Facebook or Instagram every day?”, the results appear below. No College: X1 = 55 n1 = 83 College Graduates: X2 = 74 n2 = 97 a) Identify the Null and Alternative Hypotheses for...

Many people who commute to work by car to New York City every day, use either...

Many people who commute to work by car to New York City every day, use either the Lincoln Tunnel or the George Washington Bridge. In a random sample of ?1 = 1663 people who commuted to work using the Lincoln Tunnel, out of a population of ?1 = 49,325, ?1 = 825 or ?̂1 = 0.496 said that they carpooled to work. In a random sample of ?2 =1055 people who commuted to working using the George Washington Bridge, out...

It is estimated that over 46 million people do not have health insurance coverage in the...

It is estimated that over 46 million people do not have health insurance coverage in the United States. In addition, many more individuals are underinsured or have such high deductibles and co-pays that they do not even seek medical care. Given this information, the logical question that arises is, should health care coverage be provided to everyone?

1. Are all people over 18 who are not working counted as unemployed by the Bureau...

1. Are all people over 18 who are not working counted as unemployed by the Bureau of Labor and Statistics? Explain. 2. Is the decrease in the unemployment rate always a good thing? Explain. 3. Is zero unemployment a desirable outcome? Explain.

Credit card ownership varies across age groups. Suppose that the estimated percentage of people who own at least one credit card is 64% in the 18–24 age group

Credit card ownership varies across age groups. Suppose that the estimated percentage of people who own at least one credit card is 64% in the 18–24 age group, 84% in the 25–34 age group, 77% in the 35–49 age group, and 79% in the 50+ age group. Suppose these estimates are based on 465 randomly selected people from each age group. (a) Construct a 95% confidence interval for the proportion of people in the 18–24 age group who own at...

A certain virus infects 10 in every 1000 people. A test used to detect the virus...

A certain virus infects 10 in every 1000 people. A test used to detect the virus in a person is positive 80% of the time when the person has the virus (20% false negative), and 5% of the time when the person does not have the virus (5% false positive). That is 20% of of the time when the test should be positive but didn't, and 5% of the time the test indicated positive and shouldn't. 1) Out of all...

18. In a study of memory recall, 5 people were given 10 minutes to memorize a...

18. In a study of memory recall, 5 people were given 10 minutes to memorize a list of 20 words. Each was asked to list as many of the words as he or she could remember both 1 hour and 24 hours later. Does the data below suggest that the mean number of words recalled after 1 hour exceeds the mean recall after 24 hours? Assume we want to use a 0.05 significance level to test the claim. Number of...

Part 1: It has been estimated that 1 million people die from suicide each year, with...

Part 1: It has been estimated that 1 million people die from suicide each year, with more than 36,000 suicides per year in the United States alone. Even more alarming is that these numbers are trending up not down. Read the 4 views on the underlying causes of suicide and identify the one you think is the most influential. Part 2: In your opinion, what is the best way to reduce the number of suicides among college aged individuals?

18 A firm is considering an investment project which requires the initial outlay of $10 million....

18 A firm is considering an investment project which requires the initial outlay of $10 million. The 12-year project is expected to generate annual net cash flows each year of $1 million and have the expected terminal value at the end of the project of $5 million. The cost of capital is 6 percent, and its marginal tax rate is 40 percent. Calculate the profitability index of this project. 0.84 0.09 1.70 1.34 1.09

Subjects